In this appeal of Revenue for asst. yr. 1976-77, it is claimed that on facts and in circumstances of case ld. CIT (A) erred in cancelling penalty imposed on assessee under s. 271(1)(C) of IT Act. facts about which there is no dispute, in brief, are these. assessee firm in year ending on 31st March, 1976 derived income from re-rolling business and sale of hardware goods. With intention to take benefit of Voluntary Disclosure of Income and Wealth Ordinance, 1975, now Act of 1976(hereinafter referred to as 'VDIW Act') firm filed declaration under s. 3 of VDIW Act on 31st Dec., 1975 disclosing income of Rs. 1,10,000 which according to it was earned in last many years upto asst. yr. 1975-76 and now stood invested in stock not accounted in books of accounts. After making disclosure assessee brought in book of accounts maintained by it, stock worth Rs. 1,10,000 and credited sum of Rs. 36,666.67 to each of three partners of firm with remarks "by 1/3 rd share in Voluntary Disclosure Act." firm, however, paid only Rs. 4,000 out of total amount of Rs. 52,250, which was tax payable on disclosed income as per VDIW Act. assessee in circumstances was not issued certificate under s. 8 of VDIW Act by CIT regarding declaration of income disclosed under above Act. For assessment year under appeal, assessee filed its return declaring loss of Rs. 3,74,650 on 21st Nov., 1977. ITO however made several additions and computed income of assessee firm at Rs. 2,18,351 vide order dt. 30th Sept., 1979. He also initiated proceedings under s. 271(1)(a)of IT Act and levied penalty of Rs. 93,016 under above section. two items for which penalty was levied and with which we are concerned in this appeal are as under: (i) Addition of Rs. 1,10,000 which assessee claimed to have disclosed under VDIW Act. (ii) Rs. 10,800 representing addition on account of receipt of Chit Fund. stock worth Rs. 1,10,000 which stood credited on 31st Dec., 1975 was treated as unexplained investment of year. assessee's claim that above amount was voluntarily disclosed under VDIW Act was rejected as according to ITO, assessee had not fulfilled all conditions of s. 8 of above Act as it had failed to pay income-tax in respect of voluntarily disclosed income. assessee admittedly has fulfilled other conditions as per requirement of s.8 of above Act. second addition of Rs. 10,900 represented aggregate credits of Rs. 3,600 each in accounts of three partners which according to assessee were received by partners in cash "from chit funds". assessee's plea that Chit Fund Company from whom amounts were received h s gone out of business and, therefore, direct evidence in shape of certificate from that Chit Fund Company cannot be produced, did not find favour with ITO. In absence of direct evidence, above addition of Rs. 10,800 was made in hands of assessee-firm. In penalty order, ITO merely on basis of reasoning given in assessment order, namely that disclosure of Rs. 1,10,000 was not in accordance with VDIW Act and also that evidence in respect of credit of Rs. 10,800 has not been furnished, levied penalty of Rs. 93,016 vide order dt. 26th March, 1982. On appeal, ld CIT(A) cancelled penalty levied on assessee. In respect of addition of Rs. 10,800 ld. CIT(A) took into account observations of Tribunal made in quantum appeal. He concluded that explanation given by assessee regarding credits aggregating to Rs. 10,800 i n accounts of three partners has not been found to be false. He further observed that even if for sake of argument, it be accepted that credit in accounts of partners are not out of receipts of Chit Fund Company, so far as firm is concerned it has explained source of cash credit. three partners whose amounts stood credited are financially sound and their identity is also not in dispute. As per ld. CIT(A), firm had offered prima facie acceptable explanation for credit of Rs. 10,800. As balance of preponderance probability was in favour of assessee, he held that penalty in respect of addition of Rs. 10,800 was not exigible. In respect of other addition of Rs. 1,10,000 claimed to have been disclosed under VDIW scheme, CIT(A) followed reasons given by him in case of M/s Saraswati Steel Rolling Mills, Jalandhar. basis for cancelling penalty in respect of above amount of Rs. 1,10,000 in M/s Saraswati Steel Rolling Mills as against Rs. 1,10,000 in this appeal is as under: "5. After carefully considering facts and circumstances of case and submissions of counsel for assessee, I find that penalty imposed by ITO is not exigible. ITO has not been able to prove that assessee has deliberately suppressed its income or furnished raised inaccurate particulars. It is admitted fact that assessee filed disclosure under Voluntary Disclosure Scheme on 31st Dec., 1975 and disclosed stock worth Rs. 1 lakh. This has been credited to its books of account. Necessary details regarding this disclosure and entries made in books of account are reflected in accounts accompanying return. assessee did not include Rs. 1 lakh in its declared income for asst. yr. 1976-77 for reason that this amount had been disclosed under Voluntary Disclosure Scheme and it was hopeful of obtaining certificate from CIT after making payment of taxes due. failure of assessee to obtain certificate from CIT as envisaged under Voluntary Disclosure Scheme cannot be made basis for holding assessee guilty of concealment of income or furnishing inaccurate particulars of income. As has been rightly submitted by counsel for assessee, assessee may succeed in obtaining certificate from CIT and in that case as per direction of CIT, addition of Rs. 1 lakh shall have to be deleted. On facts and in circumstances of case, it is not fit case for imposition of penalty under s. 271(1)(c) of Act as assessee has neither furnished inaccurate particulars of its income nor concealed its income. Income of Rs. 1 lakh cannot be said to have come to light as result of efforts put in by IT Department. Information regarding this was already in possession of Department and this was voluntarily furnished by assessee". Revenue has challenged above order. We have heard parties and have carefully examined record produced before us. It was vehemently argued before us on behalf of Revenue that assessee did not pay Income-tax on disclosed income and therefore, was not entitled to benefit of disclosure scheme. assessee was thus bound to disclose above amount in return submitted by assessee for asst. yr. 1976-77. By not surrendering above income, which represented undisclosed investment, assessee did conceal particulars of income and was thus rightly penalised under s. 271(1)(c) of IT Act. particulars of income and was thus rightly penalised under s. 271(1)(c) of IT Act. ld. departmental representative placed reliance on Full Bench decision of Hon ble Punjab and Haryana High Court in case of Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H) 243 (FB): (1982) 135 ITR 652 (P&H) (FB) and submitted that assessee failed to discharge burden placed on him under statutory provisions. Shri Sudershan Kapoor, Advocate, ld. representative of ther assessee on other hand emphasised that conduct of assessee had throughout been bona fide and, therefore, no penalty in this case was exigible, He drew our attention to quantum orders passed in this case and also to copies of accounts of partners filed with return. He further argued supporting order of CIT (A) cancelling penalty. After having given our careful consideration to rival submissions, we are inclined to agree with order passed by ld. CIT(A). sum of Rs. 1,10,000 has been assessed in hands of assessee in asst. yr. 1976-77 and said order subject to certain directions referred to in order of Tribunal has become final. question before us is whether on not surrendering Rs.1,10,000, assessee can be held to be liable for penalty under s. 271(1)(c) of IT Act. It is admitted position that assessee enhanced value of closing stock on 31st Dec., 1975 by Rs. 1,10,000 and credited above amount in accounts of partners and above information was submitted alongwith return. It is also not in dispute that assessee disclosed above amount to take benefit of Voluntary Disclosure Scheme and paid part of tax and also invested amount in security as per s. 8 of VDIW Act. Under s. 6 of above Act, declarant is liable to pay interest on delayed payment and under s. 7, declarant is deemed to be defaulter if income tax in respect of income voluntarily disclosed is not paid. In quantum order in case of assessee in ITA No. 431/(Asr)/1983 on 31st July, 1982, Tribunal has made following observation: "3. Before us, it has been submitted that amount in question had been duly declared in voluntary disclosure scheme. It was admitted that tax had not been paid. It was also submitted that assessee had received demand notice from ITO and, therefore, voluntary disclosure of income had to bear tax on basis of disclosure itself. Our attention was drawn to similar case of M/s Saraswati Steel Rolling Mills, Jalandhar, ITA Nos. 426 and 450 (Asr)/1980 where similar disclosure had been made and credit had not been given. Tribunal had held that provisions of s. 8 had to be kept in view for purpose of not including any income, which is disclosed in voluntary disclosure scheme. Tribunal further observed that ITO could act only on basis of certificate issued by Commissioner and, therefore, Tribunal directed that in case such certificate was produced by assessee assessment could be modified in accordance with provisions. Having considered facts, we are of view that similar directions should be given in this case as assessee is still in correspondence with Commissioner and Board. ITO is, therefore, directed to take into consideration if and when certificate from Commissioner is filed under provisions of sub-s. (8) of Voluntary Disclosure of Income and Wealth Act, 1975." Thus even on 31st July, 1982 there was hope that disclosure made by assessee might be accepted and benefit of amount disclosed be given to assessee. If in circumstances assessee carried belief that amount disclosed was not assessable in asst. yr. 1976-77, it cannot be said that belief of assessee was not bona fide. With return for asst. yr. 1976-77 assessee filed copies of accounts of its partners showing credits of disclosed amount with corresponding enhanced stock in hand. information regarding disclosed amount on 31st Dec., 1975 was with Department much before filing of return. ITO also initiated proceedings for recovery of tax on disclosed income. Thus proviso to Expln. (1) to s. 271(1)(c) of IT Act introduced w.e.f. 1st April, 1976 is clearly attracted in this case. Neither in assessment order, nor in order levying penalty, there is any finding by any authority that explanation given by assessee was not bona fide. In above circumstances, we are of opinion that assessee bona fide believed that above income was not taxable in hands of assessee for asst. yr. 1976-77 and, therefore, did not disclose above amount in return submitted by it and as such there is no case for levy of penalty under s. 271(1)(c) of IT Act. As regards levy of penalty in respect of addition of Rs. 10,800 representing amount claimed to have been received from Chit Fund Company, we entirely agree with reasoning given by ld. CIT(A). amount as stated earlier stood credited in account of each of partners and there is no dispute that partners all along admitted having brought above amount to chest of firm. Thus as far as firm is concerned, it had offered explanation, which cannot be stated to be false. At no stage of proceedings, it was claimed that partners did not have capacity to advance above amounts to firm or their identity was in doubt. In view of above circumstances, penalty in respect of addition of Rs. 10,800 has also rightly been deleted by CIT (A). For reason given above, we find no force in this appeal of Revenue. Consequently, appeal is dismissed. Only in respect of amount disclosed under VDIW Act, by firm, this order will also govern disposal of Revenue appeals in case of M/s Saraswati Steel Rolling Mills, Jalandhar , ITA No. 306 (Asr)/1986 and in case M/s Rajinder Kumar and Sons, Jalandhar, ITA No. 161 (Asr)/1986. In result, appeal is dismissed. *** INCOME TAX OFFICER v. AMIN CHAND BHOLA NATH